let's listen to ben len, the co-founder of xiaomi. >> the way we price our handsets and almost like any other handsets. e do not encrew other costs, including touring costs, r. and d. costs and shipping costs. we price this right at the rock bottom price material of the handset itself. >> how do they make money? [laughter] >> they don't know what the market is. >> they don't. they don't call tooling, r. and b., marketing. those are expenses. if that's not in the phone, someone else is paying for it. >> they bring the cost curve down. they start selling the me-3 basically at break even. the phone has a yearlong life cycle so by the end of it they're making a 10% to 15% margin. >> as the component costs fall, margins start to apyre. they also try to make money on certain services and use software updates. >> that is one of the most unique things about xiaomi. they release a software update every friday. >> it is to a smaller group of baby users that love to try out new things that look for bugs and look for the company to develop new features. >> maybe that's the microsoft inspiration, wh